The True Cost of Motherhood: How the Gender Pay Gap Impacts Women With Children

The way women need to plan their personal finances differs from how men need to plan theirs, for a range of reasons. The gender pay gap is one of them, and it still very much exists.

In spite of recent improvements, Pew Research suggests that women in the US still earn around 85% of men’s earnings, but what really needs consideration is that the gender pay gap isn’t consistent over a lifetime. It starts off smaller than 85%, and ends up much bigger — at least it does when women choose to have children.

Young men and women who haven’t yet had children tend to earn a similar amount, while older women with children see that pay gap increase. Regardless of whether those women later return to work, women in retirement overall have less income and a lower net worth than men, on average. Here’s how that all plays out, and what we can do about it.

Early On, The Gender Pay Gap Is Narrow

In the 25 to 34 age group, women tend to earn 95% of what men earn. That’s still five cents less on the dollar, in spite of the fact that women now have higher college enrolment and graduation rates than men. However, it’s a much smaller gap than is likely at a later age.

Since this is, statistically speaking, the time women are most likely to closely match men it terms of earning, it’s a good time to think about saving, investing, and putting the maximum amount possible into an employer matched pension scheme.

Remember that retirement investments made early are worth much more than those made later, so now might be a good time to max out that 401k, for many women. And if you’re a man who plans to have a family? Early investing is also important. When your partner’s income drops, you may not be able to afford to keep investing at the same rate.

The Decision that Changes It All

Probably the most important decision any young woman makes is when and whether to have children. While the gender pay gap may be just five cents on the dollar for the young and childfree, that changes substantially when children enter the picture.

The Institute for Women’s Policy Research found that the median annual earnings for mothers amounted to just 61.7 cents on the dollar when compared directly to fathers. And that was based on all those with earnings, presumably excluding full-time stay-at-home parents (who statistically are mostly mothers).

Ultimately, the report concluded, “The wage gap between mothers and fathers is substantially wider than the wage gap between all women and all men.” Having (or not having) children is about much more than finances, of course, but finances are certainly one of many things to be considered when deciding when, whether, and how to embark on parenthood.

Financial considerations are certainly one of the things behind why so many women, and men, are choosing to remain child-free. If, however, you and your partner both very much want to have a family, it will ideally involve a fair bit of financial planning.

Things to Do Before Having Children

If you’re sure children of your own are a future goal of yours, it’s never too early to think about how to protect yourself financially, and avoid the mother-father pay gap if you can. Here’s how.

Explore Employee Benefits

Depending on where you live in the world, and your employer’s policies, you may get a year’s paid maternity leave or a few months unpaid. Paid paternity or general parental leave is less common, but often available. Some employers also offer subsidised childcare and other benefits. Look very carefully at what’s available to you and plan accordingly.

Make sure you check every benefit available — to both parents. It’s shocking how often parenthood is seen as a women’s issue, when it comes to work and finances. Don’t miss out on benefits offered to parents by the father’s employer.

Draw Up a Realistic Budget

Families are expensive, so think through your future budget before you start one. Don’t assume that you’ll take a short maternity leave and then continue on the exact career path you were already on.

Even if you think it won’t apply to you, factor that gender pay gap in, and see if you could still meet your goals as a couple and a family if your income was reduced by that much. Calculate how it would impact your future, your family, and your retirement.

The purpose of this exercise isn’t to discourage you from starting a family. It’s to ensure you understand the financial implications, and facilitate the next step.

Make a Plan

One of the reasons women are suffering in retirement is an expectation that they will take on all the burden of reduced income and simply not be able to invest for a while.

There is also an expectation that they will spend far more of their income on the family than men will, with research from one global initiative concluding that women invest 90% of their income back into their families, compared with 35% for men. If you both want a family, it’s only fair that you should both sacrifice equally to make it happen, at least from a financial standpoint.

Now is a good time to look at all the details, including how you’ll pay for childcare and how you’ll save for things like your offspring’s education. Plan in advance how this very expensive new life phase should be financed, and ensure it’s fair to both parties.

Women are increasingly choosing not to have children due to the financial stresses mothers feel in a society that doesn’t value motherhood, and doesn’t do much to support the decision. But if parenthood is something that is an important goal for you, there’s a lot to be said for planning for it carefully, especially from a financial point of view.

Thinking of starting a family? Talk to a specialist financial advisor about everything you can do to make life easier.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen